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Why Legacy ERP Systems Are Draining Your IT Budget

Maintaining outdated ERP systems can eat up as much as 80% of your IT budget. These systems, once seen as cutting-edge, now act as a financial drain—demanding constant upkeep while delivering diminishing returns.

The result? IT teams that are stuck in maintenance mode, with little bandwidth left to drive the innovation businesses need to stay ahead.

Imagine if those resources could be redirected toward transformation and growth. Let’s look at how legacy ERP systems hold businesses back, the opportunities they leave unexplored, and why shifting to the cloud could be the game changer your organization requires.

The Cost Breakdown of Legacy ERP Systems

The financial strain of legacy ERP systems extends well beyond their initial price tag. These outdated platforms quietly siphon budgets across multiple areas, piling up hidden costs that hinder growth and block innovation. From the hardware they rely on to the licensing fees and labor they demand, legacy systems often act more like obstacles than assets. Below are three key ways these systems limit businesses and keep them from achieving their true potential.

Hardware and Infrastructure Costs

Legacy ERP systems rely heavily on physical infrastructure, which not only increases costs but also exposes businesses to significant risks. Consider the impact of server failures—not just the immediate repair expenses but the ripple effects of unplanned downtime. Reports suggest that IT downtime can cost businesses as much as $9,000 per minute.

Cloud ERP solutions eliminate these vulnerabilities by providing uptime guarantees and adaptable, scalable environments. By shifting to the cloud, organizations can maintain near-constant availability, protecting both their bottom line and their reputation in an increasingly competitive market.

Licensing and Support Costs

Traditional ERP licensing models are both inflexible and costly. Businesses often pay high annual fees for support and are locked into licensing agreements that fail to accommodate growth. A mid-sized organization expanding its workforce might find itself renegotiating licenses, adding tens of thousands in unexpected costs. Unlike legacy systems, cloud ERP solutions adopt subscription-based pricing models that allow businesses to scale cost-effectively.

Human Resource Burden

Maintaining legacy systems often demands a dedicated IT workforce to handle patches, updates, and integrations—tasks that require specialized expertise and inflate operational costs. These teams spend much of their time on routine maintenance, leaving little room to explore new opportunities or drive innovation. Research from the Society for Information Management shows that organizations allocate 60% to 80% of their IT budgets to sustaining outdated systems, effectively sidelining initiatives like AI integration or process automation that could propel business growth.

The Opportunity Cost of Maintenance vs. Innovation

Every dollar and hour spent maintaining legacy ERP systems is a dollar and hour not invested in advancing your business. The cost of sticking with outdated technology isn’t just financial—it’s strategic. While competitors embrace modern tools to streamline operations and uncover new opportunities, companies bogged down by maintenance are missing out on the chance to innovate and thrive. Let’s quickly look at how this misplaced focus impacts budget allocation and why innovation is the ultimate competitive advantage.

Budget Allocation Challenges

Focusing too many resources on maintaining legacy ERP systems doesn’t just slow growth—it limits innovation entirely. Imagine a Contract Research Organization (CRO) tied up with system upkeep, missing critical opportunities to implement advanced analytics that could unlock new revenue streams. This isn’t a rare scenario; many businesses fall into the same trap. Studies consistently show that organizations prioritizing innovation over maintenance achieve significantly higher returns. According to Deloitte, digital vanguards—those that dedicate more of their IT budgets to innovation—invest 26% in future-focused initiatives compared to just 18% by their peers, leading to measurable improvements in business performance.

Innovation as a Competitive Advantage

Businesses that prioritize innovation remain agile and gain a competitive edge over those clinging to outdated tools. Legacy ERP systems can’t keep pace with today’s fast-changing markets, creating a widening gap between forward-thinking companies and those stuck in the past. Leaders in industries such as SaaS and life sciences are increasingly leveraging cloud ERP to stay ahead. For example, Merck Life Science adopted cloud solutions to enhance supply chain resilience and meet volatile demand, demonstrating the strategic advantage of cloud ERP in the life sciences sector.

How Cloud ERP Eliminates Cost Barriers

Switching to cloud ERP isn’t just about upgrading technology—it’s about rethinking how businesses allocate resources and manage operations. By removing the burdens of physical infrastructure, unpredictable costs, and high-maintenance systems, cloud ERP clears the way for smarter, more efficient use of IT budgets. Here’s a closer look at how it reduces costs across three critical areas.

No More Hardware Worries

Cloud ERP eliminates the need for physical infrastructure, replacing servers with a scalable, secure, remote environment. This shift spares businesses from large capital expenses and mitigates risks associated with hardware failures. For instance, a life sciences company transitioning to Oracle Cloud ERP experienced streamlined processes and improved reporting, highlighting the operational efficiencies gained through cloud adoption.

Subscription-Based Pricing

With predictable monthly pricing, cloud ERP makes cost management straightforward, enabling businesses to scale without unexpected expenses. Picture a setup where you pay only for what you actually use, aligning costs with your organization’s needs rather than being locked into rigid, outdated agreements. For example, a biotechnology firm leveraging SAP S/4HANA in a private cloud environment gained real-time visibility and unified its departmental functions—proving how transformative the right ERP model can be. What could your organization accomplish if freed from the financial rigidity of traditional ERP models?

IT Staff Optimization

Cloud ERP systems dramatically reduce the need for routine maintenance, freeing IT teams to focus on initiatives that directly impact the bottom line. Imagine an IT department previously bogged down by patch management and server upkeep shifting its focus to launching a new customer portal or implementing automated billing systems. These projects not only streamline operations but also drive revenue growth, showcasing the true value of reallocating IT resources from maintenance to innovation.

Why It’s Time to Rethink Your IT Budget

Legacy ERP systems may have served their purpose in the past, but today they’re holding businesses back. The costs, both financial and operational, far outweigh any benefits, while their rigidity limits the ability to adapt in fast-moving markets. Imagine an IT budget unburdened by outdated systems, enabling your team to invest in technologies that redefine what’s possible. By switching to cloud ERP, businesses can eliminate inefficient spending, improve agility, and focus on strategies that create measurable impact. The question isn’t whether to modernize—it’s how much your business stands to gain when you do.

Next Steps

Ready to take the next step toward modernizing your IT budget? Don’t let outdated systems hold your business back. Our team of experts at Sikich specializes in helping companies transition to cloud ERP solutions tailored to their needs. Whether you’re exploring options or ready to make a move, we’re here to guide you every step of the way.

Contact us today to learn how we can help you reimagine your IT budget and position your business for growth and success.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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